On Dec. 23, 2022, Matthew Russell Lee from the Inner City Press published the recently unsealed guilty plea transcript of Caroline Ellison, Alameda Research’s former CEO. In her statements, Ellison describes that she was the co-CEO and CEO of Alameda, and under those roles, she reported directly to the former FTX CEO Sam Bankman-Fried (SBF). The ex-Alameda CEO’s testimony details that she was fully aware from 2019 to 2022, that Alameda Research had access to a special borrowing facility that allowed the company to maintain an unlimited line of credit with zero collateral. The ‘borrowing facility,’ according to Ellison, was FTX’s customer funds.
Caroline Ellison Details FTX’s Misconduct With Alameda and the Co-Mingling of Customer Funds Started From the Very Beginning
Following the unsealing of Caroline Ellison’s plea deal, Inner City Press reporter Matthew Russell Lee published a tweet storm that featured screenshots of Ellison’s unsealed guilty plea transcript. Russell Lee said that the plea arraignment was “held in secret, and not docketed until today, once Bankman-Fried was freed on $250 [million] bond.” If Ellison’s testimony is true, the document highlights a number of infractions both FTX and Alameda executives partook in since 2019.
“From 2019 to 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried. I understood that executives had implemented special settings on Alameda’s FTX.com account that permitted Alameda to maintain negative balances in fiat currencies and cryptocurrencies,” Ellison’s testimony details. “In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances, and without being subject to margin calls or FTX.com’s liquidation protocols,” the ex-Alameda CEO added.
Ellison’s account of the situation continued:
I understood that if Alameda had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that customers had deposited on the exchange.
Ellison Understood FTX Customer Funds Were Used to ‘Finance FTX’s Loans to Alameda,’ Ex-Alameda CEO Is ‘Truly Sorry’ for What She Did
Ellison was aware that many of Alameda’s investments were illiquid, and she said she fully agreed to borrow funds from FTX’s coffers. “While I was…
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